The Reserve Bank of India Monetary Policy Committee on Friday kept both the repo rate and the reverse repo rate unchanged. The repo rate stayed at 4% and the reverse repo rate at 3.3%.

The repo rate is the rate at which RBI lends to its clients generally against government securities. The reverse repo rate allows banks to deposit funds with the central bank and earn interest on it.

“The deep contraction of quarter one is behind us, the silver lining in visible,” said Reserve Bank of India Governor Shaktikanta Das while announcing the policy decisions of the Monetary Policy Committee. “The mood of the nation has shifted from fear to hope.” Das said the committee unanimously voted to keep rates unchanged, and decided to maintain its accommodative monetary policy stance to support growth amid the coronavirus pandemic.

He said it will be a three-speed recovery with individual sectors showing different trajectories. “Real GDP in 2021 is likely to decline by 9.5% but speedy rebound is anticipated,” he added. The RBI governor said inflation was likely to remain at elevated levels in September, and ease in the third and fourth quarters of current financial year.

Das said India’s GDP growth may turn positive in the fourth quarter. “I am an optimist… we can dream of a brighter tomorrow,” he added. “Global economic activity has rebounded in Q3, albeit unevenly. Global financial conditions continue to remain benign.”

“The rural economy looks resilient. Food grain production is set to cross another record in FY21. Migrant labour is returning to work in urban areas. Online commerce is booming, people are getting back to offices. Inflation would ease closer to target by Q4. The mood is shifting from fear and despair to hope… GDP growth may turn positive by Q4.”

— RBI Governor Shaktikanta Das

This is the first meeting of the newly formed Monetary Policy Committee. On October 6, the Centre appointed economists Shashanka Bhide, Ashima Goyal and Jayanth Varma as external members of the Monetary Policy Committee of the RBI. The appointment has come after the government faced criticism over failing to act on time to appoint an external panel to the Monetary Policy Committee.

The delay in appointments had forced the RBI to defer its three-day interest-rate meeting last week, without giving a new date of its policy decision. The meeting was scheduled from September 29 to October 1.